(Solution Document) Question: 1) The purpose of the Sales Journal is the same as the purpose of the Purchases Journal. True False 2)The Sales Returns and Allowances...


Question:1) The purpose of the Sales Journal is the same as the purpose of the Purchases Journal.

True

False

2)The Sales Returns and Allowances account is a contra-revenue account.

True

False

3)The Sales Discount account is a contra-revenue account which has a credit balance.

True

False

4)The Cost of Sales account is a Current Revenue account.

True

False

5)The Sales Journal is one of the special-purpose journals which is used to record sales of merchandise on account.

True

False

6)The customers' subsidiary ledger accounts must reconcile with the Accounts Receivable general ledger account.

True

False

7)The Cost of Sales account is an expense account with a normal credit balance.

True

False

8)The two methods of writing off bad debts accounts are: the allowance method and the direct write-off method.

True

False

9)The allowance method best illustrates the matching principle of accruing for uncollectible accounts expense.

True

False

10) Sales Returns and Allowances is a contra-revenue account that is found in the Balance Sheet.

True

False

11)Company N sold merchandise on account to Customer O for $3,400.00 on July 1. The terms of sale are: 1/15, n/30. On July 4, Customer O returned $400.00 worth of merchandise. The cost of these inventory items sold is $1,000.00. The cost of the inventory items returned is $40.00. Company N uses perpetual inventory system.Refer to Table 1, the entry on the books of Company N on July 1 to record the sales will include:

 

Debit to Cash for $3,400.00

Credit to Inventory for $3,000.00

Debit to Cost of Sales for $3,400.00

Credit to Accounts Payable for $3,000.00

Credit to Sales Revenue for $3,400.00


12) Company N sold merchandise on account to Customer O for $3,400.00 on July 1. The terms of sale are: 1/15, n/30. On July 4, Customer O returned $400.00 worth of merchandise. The cost of these inventory items sold is $1,000.00. The cost of the inventory items returned is $40.00. Company N uses perpetual inventory system.Refer to Table 1, the entry on the books of Company N on July 4 to record the return of merchandise will include:

 

Debit to Sales Returns and Allowances for $400.00

Credit to Cash for $400.00

Debit to Cost of Sales for $40.00

Credit to Accounts Receivable for $40.00

Debit to Inventory for $400.00


13) Company N sold merchandise on account to Customer O for $3,400.00 on July 1. The terms of sale are: 1/15, n/30. On July 4, Customer O returned $400.00 worth of merchandise. The cost of these inventory items sold is $1,000.00. The cost of the inventory items returned is $40.00. Company N uses periodic inventory system. Refer to Table 1, the entry on the books of Company N on July 1 will include:

 

Debit to Cash for $3,000.00

Credit to Accounts Payable for $3,400.00

Debit to Accounts Receivable for $3.400.00

Credit to Cost of Sales for $1,000.00

Debit to Inventory for $1,000.00


14)Company N sold merchandise on account to Customer O for $3,400.00 on July 1. The terms of sale are: 1/15, n/30. On July 4, Customer O returned $400.00 worth of merchandise. The cost of these inventory items sold is $1,000.00. The cost of the inventory items returned is $40.00. Company N uses periodic inventory system.The entry on the books of Company N on July 4 will include:

 

Debit to Accounts Payable for $400.00

Credit to Cash for $400.00

Debit to Inventory for $400.00

Credit to Accounts Receivable for $400.00

Debit to Sales Discounts for $40.00


15) The account, Sales Returns & Allowances is NOT:

A contra Sales account

Found in the Income Statement

A revenue account

An account with a debit balance

None of the above


16) The total Accounts Receivable is $100,000.00. The company decided to write-off 5% of the Accounts Receivable at the end of the year. Customer A owes $4,000.00 and filed for bankruptcy. On the following year, the Customer A won the lottery and paid the company the full amount of what he owes.Refer to Table 2, the adjusting entry to write off the uncollectible accounts under the allowance method will include:

 

Debit to Accounts Receivable for $100,000.00

Credit to Allowance for Uncollectible Accounts for $5,000.00

Debit to Accounts Receivable for $5,000.00

Credit to Uncollectible Accounts Expense for $5,000.00

Debit to Cash for $5,000.00


17) The total Accounts Receivable is $100,000.00. The company decided to write-off 5% of the Accounts Receivable at the end of the year. Customer A owes $4,000.00 and filed for bankruptcy. On the following year, the Customer A won the lottery and paid the company the full amount of what he owes.

Refer to Table 2, the entry to write-off the uncollectible accounts under the direct write-off method will include:

 

Debit to Allowance for Uncollectible Accounts for $5,000.00

Credit to Accounts Receivable for $4,000.00

Debit to Uncollectible Accounts Expense for $100,000.00

Credit to Allowance for Uncollectible Accounts for $5,000.00

Debit to Accounts Receivable for $5,000.00


18) The total Accounts Receivable is $100,000.00. The company decided to write-off 5% of the Accounts Receivable at the end of the year. Customer A owes $4,000.00 and filed for bankruptcy. On the following year, the Customer A won the lottery and paid the company the full amount of what he owes.

Refer to Table 2, the entry to write-off Customer A's account under the allowance method will include:

 

Debit to Allowance for Uncollectible Accounts for $4,000.00

Credit to Allowance for Uncollectible Accounts for $4,000.00

Debit to Accounts Receivable for $4,000.00

Credit to Uncollectible Accounts Expense for $4,000

Debit to Accounts Receivable for $100,000


19) The total Accounts Receivable is $100,000.00. The company decided to write-off 5% of the Accounts Receivable at the end of the year. Customer A owes $4,000.00 and filed for bankruptcy. On the following year, the Customer A won the lottery and paid the company the full amount of what he owes.

Refer to Table 2, the entry to record the recovery of what was written off under the allowance method will include

 

Debit to Accounts Receivable for $5,000.00

Credit to Cash for $5,000.00

Debit to Uncollectible Accounts Expense for $4,000.00

Credit to Accounts Receivable for $4,000.00

Debit to Allowance for Uncollectible Accounts for $5,000.00


20) The total Accounts Receivable is $100,000.00. The company decided to write-off 5% of the Accounts Receivable at the end of the year. Customer A owes $4,000.00 and filed for bankruptcy. On the following year, the Customer A won the lottery and paid the company the full amount of what he owes.

Refer to Table 2, the entry to record the recovery of what was written off under the direct write-off method will include:

 

Debit to Cash for $4,000

Credit to Allowance for Uncollectible Accounts for $4,000

Debit to Allowance for Uncollectible Accounts for $5,000

Credit to Cash for $5,000

Debit to Accounts Payable for $4,000

 







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